Days of Change

Day 421

December 30, 2009
1 Comment

Insurance is reverse gambling.

The best example is homeowner’s insurance. Most likely, you won’t pay as much as your home costs in premiums. If your house burns down, however, you get a sum of money equal (sort of) to that house. Lately, that dynamic has changed. Filing claims on house damage allows a homeowner to tap into the restorative aspects of an insurance policy. That’s costly for insurance companies and they respond by raising rates.

Then there’s life insurance. That’s a guaranteed payoff. Then again, people get rid of policies, have a non-qualifying death, or use the policies to get a cash payout early. Plus, it doesn’t benefit you so much as those you leave behind.

One form of involuntary insurance is automotive. Most states have determined that there is an interest in motorists carrying liability insurance and require it for driving. In that case, you buy insurance in case you are at fault. Someone hurt by your car will be compensated by the insurance company and not you. Luckily, the number of bad accidents is relatively small and insurance is not terribly expensive.

Health insurance is a different animal altogether. I heard famous libertarian and professional debunker Penn Gillette describe insurance as “pre-paid” health care. We pay premiums, the insurance companies take 15% and most of us get almost as much health care value out as we pay in.

Not exactly. Where I work, 75% of my health insurance is “paid for” by my employer. That amounts to 10% of my income. My Medicare taxes are about 1.5% of my income. My employer is not doing this for free, either. Besides being taxed for a Medicare program in my state and potentially losing out on 10% more pay, I also get to subsidize my employer’s tax break with my taxes.

Then why shouldn’t I be for national health insurance? My employer would be out of the picture. Those damn millionaires (like the owners of my company) would be on the hook. Everyone would be covered. Rainbows would come out of the sky and unicorns would prance around my backyard.

Health insurance gambles on being sick. A person’s investment in health care is positive until retirement in most cases. Any doctor will tell you the most expensive medicine occurs in the last few years of life. People who live past 80 get more from Social Security than they put in. For now, we accept this.

When Social Security started for people over 65, the life expectancy was 62. It was maybe 70 when Medicare started for those over 65. The median age of an American is 36 now. We have spent decades front-loading payments by the young to insure the old. The bubble in this economy is age.

This is the hard reality. Most countries with socialized medicine have made the tough choices. Those choices mean the old, the dying and the non-life-threateningly injured get the least care and the least often. Many of these countries put the young on the government dole, so as not to burden them like the young in this country.

How do we fix this problem without resorting to socialism? We use the free market and austerity. Disposable income is a fallacy. We should rightfully be keeping all of our money. We also have to be smart. Any investment is risky. Gold can drop by 50% in a few years. Inflation can devalue the money stuffed in your mattress.

As for the free market, we have to learn to medically haggle. Medicare is setting prices so low, doctors are either dropping the patients or leaving the profession. We need to deflate the cost structure in medicine. That would require the elimination of the two-tiered fee system where those with no insurance are charged 10 times as much for tax purposes.

Insurance needs to go back to where it belongs. We could eliminate the horror stories of $1,000,000 medical bills with a cheap, high deductible policy. Pay for your $100 office visits and drugs with your own money, like your car payments and your credit card bills. Keep the insurance as a means to pay the unpayable. Or we can just keep gambling with the future.

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